With so much pessimism hovering over the 2023 housing market, many potential home sellers are worried about listing their home. If you’re thinking about selling, slowing home sales, lower prices, and higher mortgage rates could all be sparking doubts. But there’s actually some good news for sellers.
Some experts are seeing signs flash that indicate the housing market could benefit sellers in 2023. In this article, we talk to real estate veterans and housing market experts who lay out six reasons the rest of this year’s housing market could be more seller-friendly than most realize.
Why the housing market may open up opportunities for sellers
There’s no doubt that the real estate market in most of the country is calmer than it was two years ago. As mortgage rates increased, it helped pour cold water on an unusually hot market. However, experts say these often-overlooked factors suggest the housing market is still seller-friendly:
1. Selling competition is dropping off
A recent decline in home prices caused many to think buyers will hold all the cards in 2023, but a downtrend in prices doesn’t necessarily mean homebuyers will wield full negotiating power.
One reason sellers likely won’t cede too much power is that a record number of sellers are backing out of the market. Rick Ruiz, a top-selling real estate agent who has been selling in Las Vegas for more than 20 years, says many sellers are choosing not to list because they don’t want to have to swap their previous mortgage rate for one with higher financing when they buy their next home.
Ruiz says that because many sellers feel locked in, selling competition is dwindling, and buying competition for some homes is increasing.
“That takes two properties out of the equation: one that I’m going to sell and one I’m going to purchase, which is creating — now for the first time ever — some competition between buyers, especially in very affordable homes,” he explains.
For the sellers who do decide to put their property on the market, this drop-off in listings could mean more room to negotiate conditions or secure the price they want.
2. Rate declines could kick up demand
The average rate for a 30-year fixed mortgage climbed above 7% in November – stoking fears that demand could dry up. However, that figure has slid lower in recent months – receding to 6.42% as of March 2023.
Nadia Evangelou, the National Association of Realtors’ (NAR’s) Senior Economist & Director of Real Estate Research, says she expects rates to continue to decline this year, and that could cause more buyers to enter the housing market – and kickstart demand.
“When we had lower and declining mortgage rates in December and January, we saw more buyers come back to the market,” she says. “If mortgage rates fall back later in the year, we should also expect more buyers to be back to the market, and this would be good news for sellers.”
3. Low inventory could prop up prices
Even though prices have ticked lower in some parts of the country, Evangelou expects low inventory to stop prices from falling much further. She also says low inventory figures should prevent a major housing crash from hitting the nationwide market.
“Demand continues to outpace housing supply, and this is due to low housing inventory,” says Evangelou. “We don’t expect to have any housing crash. The opposite: The housing market seems to be turning around.”
According to St. Louis Fred Economic Data, the active listing count for U.S. single-family and condo/townhomes has sunk from over 1M in 2019 to under 600,000 listings in February 2023. And building trends suggest the housing inventory shortage could worsen. According to a Census Bureau report, housing starts in December 2022 were 21.8% lower than the previous year. A lower supply of homes could catch prices before they fall too low, and it may give home sellers a significant edge in the near future.
4. More affordability could encourage buying
Inflation and high living costs have pummeled buyers in recent years. That strong economic pressure may have elbowed a large portion of the population out of the housing market. In fact, according to the Cato Institute 2022 Housing Affordability National Survey, 87% of Americans said they were worried about the cost of housing in December 2022. The same survey found more than two-thirds of Americans (76%) thought that period, the winter of 2022, was a bad time to buy a house.
HomeLight’s Top Agent Insights for New Year 2023 suggest agents also saw this affordability problem influence potential buyers in their area. The report found 67% of agents believe first-time buyers will explore more affordable areas.
Now, the Fed is actively working to curb inflation, and housing prices that felt unrealistic for many buyers may be calming to more reasonable levels. Evangelou says improved affordability could motivate buyers throughout the rest of the year.
“We expect housing affordability to be one of the main challenges for buyers in 2023, and this is because of mortgage rates and high home prices,” she says. “However, later in the year, this can change, and this is what we expect for the buyers.”
If conditions become more affordable, it could wake up a whole new group of buyers to the possibility of owning a home and cause mid-market home sales to perk up. In fact, Evangelou says she believes we’re already seeing affordability drive new demand in areas of the country where prices are falling.
“When we look at the regional level for pending home sales, we see the West Region experienced the highest increase,” she explains. “The reason for that is that the West, and especially in California, is experiencing price declines. Prices dropped there, and we saw more contract signings because more buyers could afford to buy.”
5. Home sales are bouncing back in some areas
Home sales started to sputter in January of 2022. In fact, according to NAR, January 2023 marked the 12th consecutive month of declining home sales. But then, in February, the NAR reported existing home sales surged 14.5%, ending the 12-month streak of declines.
As Evangelou points out, home sales appear to be picking up as mortgage rates settle down.
“When we look at home sales, we see that they increased the last two months,” she says. “We expect home sale activity to pick up in the following months.”
This uptick in activity might mean affordability, mortgage rate conditions, or other factors are emboldening buyers.
The opportunity is that [sellers] don’t have as much competition. If you have buyers that are making appointments to come to your home and making offers, those are serious buyers. If it were me, I’d want serious buyers coming in to see my home and not have to wade through the people who may or may not be serious about concluding a transaction.
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6. The market is weeding out unserious buyers
There’s little doubt that the past few years have produced seller’s markets throughout most of the country. However, selling a home during a frenzied housing market can be stressful for sellers. Oriana Shea, a top-selling real estate agent who has been selling in Long Beach for more than 25 years, says she believes we’re entering a more subdued, balanced housing market that could provide a more pleasant environment for sellers.
“The opportunity is that [sellers] don’t have as much competition,” she explains. “If you have buyers that are making appointments to come to your home and making offers, those are serious buyers. If it were me, I’d want serious buyers coming in to see my home and not have to wade through the people who may or may not be serious about concluding a transaction.”
Market experts clear up home-selling misconceptions
With so many twists and turns hitting the real estate market in recent years, it’s easy for sellers to misunderstand what’s going on – or what their best next move will be. Here are a few misunderstandings that the experts say are cluttering home sellers’ vision in the current market:
False: It’s always best to wait for mortgage rates to fall before selling
It may be tempting for sellers to sit back and wait, hoping mortgage rates will drop in the near future. However, Shea says she suggests people base their decision to sell on the amount of equity they have in their home and broader market conditions, not necessarily mortgage rates.
“If you have a decent amount of equity, then I’m going to say the same thing: If you think you’re going to move at some point, do it while the prices are still lower than they were and before they start going up again because you are still in a better position equity-wise,” she says.
False: Overpricing is always a smart strategic move
Shea says many sellers wrongly assume they should overprice their home in order to take advantage of limited competition. However, she says setting too high of a price is a mistake in the current market.
“Where sellers are making a mistake is thinking, ‘Well, there’s not a lot for me to compete with, so, I’m going to price my home up here,’” she says. “You most likely will go above your price. I’ve seen it happen time and again, even with the limited inventory, the buyers are not going to pull the trigger on something overpriced. They’re waiting it out.”
False: The house will sell itself
Even though there are advantages still brewing in the current housing market for sellers, it isn’t the hot seller’s market of the last few years. That means sellers won’t be able to get away with skimping on marketing or presentation. Shea says this is an error she’s seeing more and more sellers make.
“For sellers, I would highly advise them to really pay attention to the marketing and presentation of their home. I’m just seeing so many poorly presented listings in the marketplace,” she says. “It’s too easy these days for buyers to just pass it by. You need to pay attention to the presentation, the staging, and the marketing.”
»See our handy resource page: Prepare Your Home for Sale
Sellers should keep an eye out for golden opportunities in 2023
Despite the negative sentiment swirling around the current housing market, the experts see plenty of advantages for sellers in 2023. Overall, real estate experts say that by researching the local market, putting in the prep work for a sale, and monitoring their own financial situation, sellers can position themselves to seize on upcoming opportunities throughout the rest of 2023.
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